User:Charlottehassall/sandbox

Dominance[edit]
A finding of dominance requires a two stage process. First consideration must be had to the relevant market to which the undertaking operates upon: both the relevant product market and the relevant geographic market. Second, one the market has been established, the Commission must decipher whether the undertaking enjoys a dominant position upon the given market. A fining of dominance derives from a combination of several factors, Paragraph 12 of the Commission's guidance highlights three factors that the Commission will consider:


 * 1) "constraints imposed by the existing suppliers from, and the position on the market of, actual competitors,
 * 2) constrains imposed by the credible threat of future expansion by actual competitors or entry by potential competitors and ,
 * 3) constraints imposed by the bargaining strength of the undertakings customers".

Actual Competitors:
Paragraph 13 of the Commission’s guidance states that an undertaking’s market share demonstrates a ‘first indication’ as to the position of current competitors.

Clarification arises within Paragraph 14 and 15 of the Commission’s guidance that generally low market shares demonstrate a good proxy of the absence of substantial power, (ie: dominance). Whilst the higher the market share and the longer the period of time over which it is held, the more likely the undertaking has substantial market power and as such is dominant.

The table demonstrates the approach that the Commission have adopted in its jurisprudence, when deciding an undertaking’s dominance. Whilst important, Richard Whish acknowledges that, the market share figures are, ‘simply a proxy for market power, and cannot be determinative in themselves'. Following Paragraph 12 of the Commission’s guidance, potential competitors and countervailing buying power must also be considered.

Potential Competitors:
Paragraph 16of the Commission’s guidance emphasises that the Commission will consider the potential impact of entry by new customers onto the market as well as the expansion of existing competitors. In doing so, the Commission must consider whether the entry to the market, or expansion within the market, (or threat to), is ‘likely, timely and sufficient’ enough for the undertaking to change its behaviour.

Paragraphs 16 and 17 of the Commission’s guidance gives clarification on how the criteria are to be applied :

To be ‘ likely ’, the Commission must look at how possible it is that the expansion, or entry into the market, will occur. The Commission must take into account barriers to the market: where there are barriers in place, it is difficult for a new entity to enter the market. Types of barriers that the Commission may consider are listed in Paragraph 17 . Richard Whish summaries these as “legal barriers, economic advantages enjoyed by the dominant undertaking, costs and network effects that impede customers from switching from one supplier to another and the dominant firm’s own conduct and performance".

To be ‘ timely’, the entry or expansion must be ‘sufficiently swift’ to act as a deterrence upon the undertaking from exercising dominance.

To be ‘ sufficient ’, the entry or expansion must have a significant impact to which it would deter the undertaking from exercising its dominance. The entry or expansion cannot be based on a small scale to which its impact would be limited.

 Countervailing Buyer Power: 

Paragraph 18 of the Commission’s guidance acknowledges that customers, as well as competitors, have the power to constrain competition. In doing so, the Commission must look at the ‘sufficient bargaining strength of the customer’ : Paragraph 18 sets out features that may be discussed to decipher a customer’s bargaining power:

“the customers size or their commercial significance for the dominant undertaking and their ability to switch quickly to competing suppliers, to promote new entry or to vertically integrate, and to credibly threaten to do so."

In application, Richard Whish acknowledges that it is “more likely that large and sophisticated customers will have this kind of countervailing buyer power than smaller firms in a fragmented industry".

The Commission’s guidance goes on to clarify, in Paragraph 18, that the countervailing buyer power will not be considered a sufficient restraint where only a particular, or limited, number of customers are shielded from the market share exercised by the dominant undertaking.

Motorola:

The case considered the significance of countervailing buyer power. Motorola presented the argument that it was not a dominant undertaking due the countervailing buyer power of Apple. Whilst the Commission recognised the need to consider customer’s buying power, the Commission, in finding Motorola to be dominant reinforced the guidance that whilst a customer may have significant buying power, this may not protect all of the undertaking’s customers.

Summary:

Following Paragraph 13of the Commission’s guidance, where the three conditions are satisfied, it is likely, the Commission will find the undertaking to be dominant. Paragraph 1of the Commission’s guidance reinforces that whilst dominance in itself is not illegal, once dominant, the undertaking adopts"a special responsibility not to allow its conduct to impair competition on the common market".

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